Proposed new unit trust-style "property investment funds" outlined in the Budget should make it easier and less risky for smaller investors to put their money into bricks and mortar, commentators said.

The government yesterday gave more details of the planned US-style funds, which would allow private investors and institutions to invest in residential and commercial property ranging from suburban semis to office blocks. A consultation process was started yesterday, and the new funds could be available from next year.

The chancellor's announcement follows a recommendation in the Barker review of housing supply which looked at measures to increase the supply of rented accommodation and reduce volatility in the housing market. It is proposed that the property investment funds would be closely modelled on America's real estate investment trusts (Reits), which allow individuals, mutual funds and others to invest in different types of property.

In the US and other countries, the funds operate as collective schemes which give investors the revenue from the rental income and capital appreciation from holding the property.

The consultation document issued yesterday proposes that - as happens in the US - the trusts should be required to pay at least 90% of their taxable income to investors.

The new funds would make it easier for investors to use property to fund their retirement. At the moment, smaller investors are limited to riskier routes such as buy-to-let.

"We have all been concerned by the increasing tendency of investors to put all their eggs in the buy-to-let basket," said the Association of Investment Trust Companies, which welcomed the consultation.

The Treasury also hopes that bringing in more investment and professional companies should drive up standards in the private rented sector and drive out slum landlords.

But the proposals did not appear as attractive as the property sector had hoped, said Phil Nicklin, a tax partner at accountants Deloitte. The consultation document suggests restrictions on the type of property that can be invested in. Hotels, golf courses and "specialist use property" - which could include hospitals and prisons - could be excluded.

The government plans to impose a charge for any property company conversions into property investment funds, and there could be large up-front tax costs for companies setting up a fund, said Clare Hartnell, a tax partner at accountants Grant Thornton.